Rust Consulting of Minneapolis, the agent responsible for compensation checks according to the Independent Foreclosure Review (IFR) Payment Agreement, said yesterday that "a clerical error led to some borrowers in the May 3, 2013, wave of payments being sent checks for less than the amount that the Federal Reserve directed those borrowers to be paid". Rust has corrected the mistake and announced its intentions to mail supplemental checks to affected borrowers as soon as May 17, 2013, making up for the insufficient amounts qualifying homeowners were to be paid.

Rust Consulting is expected to mail the final wave of Independent Foreclosure Review checks in mid-July 2013, according to a statement updated Thursday by the Office of the Comptroller of the Currency.

Previous statements had said that the final batch of compensation checks for eligible borrowers would be sent “during the summer.”
As of Wednesday, 2.5 million checks totaling $2.3 billion had been cashed or deposited. Check mailings began April 12.
The IFR agreement calls for $3.6 billion to cover the wrongful foreclosures or mishandled attempts at mortgage modifications by 13 servicers.
The vast majority of nearly 4 million borrowers fall under servicer errors paying out $300 to $6,000 in compensation.
Rust Consulting, the payments administrator selected by the servicers and approved by regulators, has mailed more than $3.4 billion worth of IFR checks since April 12, with the bulk of that amount sent out by April 26.
Only about 1,100 borrowers qualify for the top amount of $125,000 under the payment framework published by regulators.
But borrowers have been kept in the dark as to the process of determining compensation. With no option to appeal the payment amount under the settlement, thousands of borrowers have signed online petitions and have sought legal advise on pursuing class-action or individual lawsuits to seek rightful compensation.

Explanation of Clerical Error Causing Low Compensation Checks

"Concerned recipients will have a letter explaining the reason for the supplemental check will included with the supplemental check", assures Jenna Thuening, owner of Home Destination. "Many caught in the Minnesota foreclosure timeline are eager to gain some sense of closure to the hardships that has followed losing their homes."

Background

The recipients of the foreclosure compensation checks are mortgage loan borrowers whose homes were in any stage of a foreclosure process during 2009 or 2010, and whose mortgage servicers were among the 13 companies, or their subsidiaries or affiliates. Compensation payment checks began to go out in the mail April 12. The regulators are the U.S. Treasury’s Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System. Homeowners have called concerned with clerical errors at Rust, problems like sending checks to the wrong addresses,issuing checks to were there was no foreclosure involved, and issuing checks to deceased borrowers. The problem was caused by an error by U.S. Bank of Minneapolis, he said. Yellen said he hired Rust Consulting of Minneapolis to handle the payout to plaintiffs in the class action. Rust then arranged for U.S. Bank to accept the funds from the defendants and handle the check processing to the class members.

Bank Regulators Created Foreclosure Review Compensation Categories

Tom Gorda, a spokesman for Wells Fargo, commented "that regulators created the foreclosure review compensation categories, and the fact that a borrower received a payment does not necessarily reflect whether or not that person was harmed by improper foreclosure practices". The Federal Reserves says homeowners will have been mailed their payment no later than the end of August 2013.

Legislators Requested the GOA Monitor the Reviews

The absence of timely and clear communication to U.S. homeowners and individual borrowers at certain stages of the foreclosure process impacted transparency and eroded public confidence.

In January 2012 legislators seeking to help stop the foreclosure crisis, including Representative Maxine Waters and Senator Robert Menendez, together with Representatives Brad Miller and Luis Gutierrez, requested that the Government Accountability Office (GAO) monitor the Independent Foreclosure Review process. On April 17, 2013, the GAO issued its second report on the topic, unveiling a slew of deep failings. The report revealed what was long suspected by many observers: that although regulators publicly released more information on the foreclosure review process than is typically disclosed in connection with a consent order, key elements of communication are missing. Here are areas of need for clearer foreclosure review compensation details as outlined by the GAO.

4.4 Million Nationally To Receive Foreclosure Compensation

According to the OCC website, regulators at the Office of the Comptroller of the Currency and the Federal Reserve board announced that all 4.4. million people who received a foreclosure notice in 2009 or 2010 could expect to receive a compensation check, regardless of whether they suffered any harm or were dolefully wronged. All things being even, the $3.6 billion allocated to the indicated homeowners would find a medium of everyone gaining a check just over $800.

OCC Foreclosure Compensation Categories

Eventually, regulators established 11 categories in hopes to extend more money for homeowners who suffered greater harm. A "completed foreclosure" of a borrower protected by bankruptcy law, for example, would yield at minimum a $31,250 payout. Others would receive just $300, states Huffington Post on May 1, 2013 in an article titled Foreclosure Settlement Checks Significantly Smaller Than Regulators Forecasted. With the exception of the "Other" categories, this chart (offered by econintersect.com) uses the exact wording as posted by the OCC. Questions remain as to the description of exactly what situations fall into which categories. The "Other ($3,000 & Up)" category comprises significant number that are unspecified.

Compensation Categories

Modification Request Approved ($300 - $500)

Modification Request Denied ($1,000 - $6,000)

Modification Request Received - but no underwriting decision made ($400 - $800)

Servicer Did Not Engage With Borrower - in a loan modification or other loss mitigation action ($300 - $600)

Other Loans ($300 - $500)

Other Loans ($3,000 - $125,000)

Early Recipients Of Checks Found They Could Not Be Cashed

In a press release dated April 17, 2013, the Federal Reserve acknowledged that "some early recipients of checks informed the Federal Reserves consumer helpline on Tuesday that they were told their checks could not be cashed". It was quick to contact the paying agent, Rust Consulting, concerning the checks being sent to borrowers under the Independent Foreclosure Review and assured waiting recipients that the Federal Reserve Board's early problems with some checks have been corrected and that funds are available to offer cash for all checks issued.

Not to be confused, there is a separate, additional settlement between a number of banks, the OCC, and the Federal Reserve. Rust Consulting is also the Settlement Administrator for that settlement, and some payments have recently gone out under that settlement. To be clear - this settlement is not related to the National Mortgage Settlement, and if you are eligible for a payment under the National Mortgage Settlement, you will receive another check from Rust Consulting. We understand that Rust Consulting will not be sending out checks in the National Mortgage Settlement until late May 2013 at the earliest.

Addressing Questions About Your Foreclosure Compensation

If you were caught in the Minnesota foreclosure timeline and need clarity as to your foreclosure rights and reimbursement, read more on Minnesota's Office of Attorney General Lori Swanson's website. Questions about the status of the check or any other inquiries regarding the Independent Foreclosure Review should be given to Rust Consulting; as they are the paying agent for the Federal Reserve Board. Rust Consulting is the agency intended to handle questions and provide answers. The Federal Reserve Board promises to continue monitoring the payments closely and encourages borrowers who have concerns or experience difficulties cashing their checks to call Rust at 1-888-952-9105.

Jenna Thuening, owner of Home Destination is Minnesota Certified Distressed Property Expert who is passionate to help Minnesota real estate sellers and home buyers enjoy their homes; gaining a compensation check timely and in full may be part of that. Read Home Destination's full article on the Minnesota Foreclosure Review Compensation. Call 612-396-7832 for guidance.

If I'm out in the field, you may quickly reach me by email: jenna@homedestination.com and note how I can help you, or leave a message on my voicemail and I will return your call as quickly as possible.